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Selfish Foreign Policy Reasons, Not Altruism, Is Why Congress Enacted The FCPA In 1977

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As the Foreign Corrupt Practices Act nears its 40th anniversary, it is perhaps neither here nor there 40 years later whether Congress in enacting the law was motivated by altruistic, do-good intentions or selfish, foreign policy goals.

But then again, it is important not to reinvent history or look at historical conduct through rose-colored glasses. Indeed, there are numerous accounts of history that ignore what really happened in favor of accounts that sound better.

Sure, one will find certain statements in the legislative history to support the notion that what motivated Congress to enact the FCPA was so-called post-Watergate morality and to level the proverbial “playing field” and make the world a better place.

But let’s not kid ourselves. As detailed in “The Story of the Foreign Corrupt Practices Act,” (the most extensive piece written about the FCPA’s legislative history and largely told through the original voices of participants), the main motivation of Congress in enacting the FCPA was not altruism, but selfish foreign policy reasons.

Senator Frank Church, an FCPA leader, was clear in opening initial hearings as to the so-called foreign corporate payments in May 1975.  He stated.

“For what we are concerned with is not a question of private or public morality. What concerns us here is a major issue of foreign policy for the United States. […] It is time to treat the issue for what it is: a serious foreign policy problem.”

Representative Robert Nix, who chaired a series of House hearings in 1975 as to the foreign corporate payments, stated as follows:

“There has been a negative impact on our foreign policy already because of these revelations. Peru has expropriated property of the Gulf Corp. in that country. Costa Rica is considering expropriation legislation and other countries in Latin America may be considering such steps. The interference in democratic elections with corporate gifts undermines everything we are trying to do as a leader of the free world. . . . . . . . . . . [I]n Italy the Communist party is using the fact of multinational bribery in Italy against the political friends of the United States.”

Representative Stephen Solarz and Mark Feldman, Deputy Legal Advisor, Department of State, also expressed similar concerns during the hearing.

Representative Solarz (who emerged as an FCPA leader in the Hosue) stated as follows:

“Failure to take prompt and effective action can only encourage the continuation of these practices and, thereby, continue to create serious problems in our international economic and political relations throughout the world. One government has already been toppled and political parties in several other countries have been seriously compromised.”

Deputy Legal Advisor Feldman stated as follows:

“Let me give a few examples of events related to the disclosure of the last weeks which have impacted our foreign relations: The head of a friendly government has been removed from office and other friendly leaders have come under political attack. Both multinational enterprises and U.S. Government agencies have been accused of attempting to subvert foreign governments. A firm linked with payments in one country has had property in another country expropriated, not because of any alleged improprieties in that country, but simply on the grounds that it was an undesirable firm. Several governments have presented firms suspected of making payments with ultimatums of economic retaliation or criminal prosecution.”

In chairing another 1975 Senate hearing regarding the foreign payments, Senator Church again expressed that foreign policy was his chief concern. He stated as follows:

“There is also little doubt that widespread corruption serves to undermine those moderate democratic and pro-free-enterprise governments which the United States has traditionally sought to foster and support. Several oil companies testified before the subcommittee that they had made huge political contributions in Italy and Korea, for example. They claimed to be supporting the democratic forces who are friendly to foreign capital in those countries, but in fact, they were subverting the basic democratic processes of those two countries by making illegal contributions and were, at the same time, providing the radical left with its strongest election issue. The large and steady gains made by the Italian Communist Party in recent elections are due in no small part to the fact that it is believed to be the only non-corrupt political force in the country, while the other parties are seen as the handmaidens of foreign and domestic financial interests. So that while bribes and kickbacks may bolster sales in the short run, the open participation of American firms in such practices can, in the long run, only serve to discredit them and the United States. Ultimately, they create the conditions which bring to power political forces that are no friends of ours, whether a Quaddafi in Libya, or the Communists in Italy.

I have focused on the foreign policy aspects of this issue because that is the chief concern of my subcommittee.”

Likewise, Senator Church stated as follows on the Senate floor:

“[T]hese very practices have extremely serious consequences both for the conduct of U.S. foreign policy and the reception U.S. business receives abroad.

U.S.-based corporations should not be allowed to weaken a friendly government through bribery and corruption while the United States is relying on that government as a stable sure friend in supporting our policies. U.S.- based corporations should not be supporting political factions antithetical to those supported by the U.S. Government. Nor do we want, as was revealed in Multinational Subcommittee hearings, the defense priorities of our allies distorted by corporate bribery.

Further, when these payments become known, and they will and do, whether it be through revelations by Senate subcommittees or though the common knowledge that leads to revolution and the downfall of such governments as the Idris regime in Libya, the repercussions are often international and the foreign policy implications for the United States severe. Payments by Lockheed alone may very well advance the communists in Italy. In Japan, a mainstay of our foreign policy in the Far East, the government is reeling as a consequence of payments by Lockheed. Inquiries have begun in many other countries. The Communist bloc chortles with glee at the sight of corrupt capitalism.”

Deputy Secretary of the Department of State Robert Ingersoll, in early congressional hearings, stated as follows:

“We have seen dramatic evidence in recent weeks of the potential consequences of disclosure in the United States of events which affect the vital interests of foreign governments. Preliminary results have included serious political crises in friendly countries, possible cancellation of major overseas orders for U.S. industries and the risk of general cooling toward U.S. firms abroad. Many foreign commentators and opinion makers have expressed concern about the effects of U.S. processes in their countries and suggested that the United States has a responsibility to take into account the interests of its allies when it is cleaning up its own house.

I wish to state for the record that grievous damage has been done to the foreign relations of the United States by recent disclosures of unsubstantiated allegations against foreign officials. As I said, we do not condone, nor does the U.S. Government condone, bribery by American corporations overseas. On the other hand, it is a fact that public discussion in this country of the alleged misdeeds of officials of foreign governments cannot fail to damage our relations with these governments.”

Representatives John Murphy, John Moss, and Michael Harrington also expressed concern about the foreign policy ramifications of the foreign corporate payments during various congressional hearings.

Representative Murphy stated as follows:

“The foreign policy implications for the United States are staggering and in some cases, perhaps irreversible. Payments by Lockheed alone may well have advanced the Communist cause in Italy. In Japan, a mainstay of our foreign policy in the Far East, the government is reeling as a consequence of such payments. On August 16[, 1976], former Prime Minister Tanaka was indicted on charges of accepting $1.7 million from Lockheed. And most recently, the monarchy in the Netherlands has been rocked by the Lockheed scandal.

All of this lends substantial credence to the suspicions by extremists that U.S. businesses operating in their country have a corrupting influence on their political systems.”

Representative Moss stated:

“Business practices of these corporations abroad often impact directly on U.S. foreign policy. Disclosures have shown that United Brands dealings with the Honduran Government and Lockheed’s relationship with the Dutch Crown, Italian political parties, and former key leaders of the ruling Japanese party had an impact as great as the Department of State might have had.

Surely the public expects more than to have foreign policy made in the board rooms of United Brands or Lockheed. Not only is a publicly owned corporation unaccountable to the public when it uses its assets to bribe foreign governmental officials, but also it is unaccountable to its shareholders, the ones to whom the assets belong.”

Representative Harrington stated as follows:

“[I]t is obvious that the foreign policy repercussions of such payments can be severe. In their support of one foreign political party over another, American corporate activities can undermine official U.S. policy. Both Chilean President Allende and Venezuelan President Perez broke off talks with U.S. officials on compensation for nationalized property when they learned of corporate payments. . . . Numerous other examples could be cited but the point is clear. U.S. business contributions to foreign political parties can severely impair official policy. The U.S. Government, not private business, should conduct U.S. foreign policy.”

Representative Solarz stated:

“[W]hat is at stake is much more than the individual interests of corporations which are competing for a share of foreign markets. What is in fact at stake is the foreign policy and national interest of the Untied [sic] States. It is clearly in our interest to put a stop to these pernicious practices. Leaving aside the question of whether bribery is necessary to win contracts—and there is much evidence that it is not—there is much more involved than a few dollars. We simply cannot permit activity which so damages U.S. foreign policy.”

A Senate report stated as follows:

“Bribery of foreign officials by U.S. corporations also creates severe foreign policy problems. The revelations of improper payments invariably tends to embarrass friendly regimes and lowers the esteem for the United States among the foreign public. It lends credence to the worse suspicions sown by extreme nationalists or Marxists that American businesses operating in their country have a corrupting influence on their political systems. It increases the likelihood that when an angry citizenry demands reform, the target will be not only the corrupt local officials, but also the United States and U.S. owned business.

Bribery by U.S. companies also undermines the foreign policy objective of the United States to promote democratically accountable governments and professionalized civil services in developing countries.”

In short, Congressional leaders wanted foreign governments and foreign political parties accountable and answerable to the U.S. government itself, not to private enterprise because of the bribe payments.

This was not a pure or altruistic reason for enacting the FCPA, it was a power play tied directly to foreign policy.

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